Retailers are stepping up efforts to close a “loophole” that allows GST-free purchases of overseas goods costing less than $400.

They should give up their silly campaign to tax minor online purchases. It would cost the Government far more in administration than it would bring in, in revenue.

Retailers Association chief executive John Albertson said the import threshold was costing the Crown $300 million a year in lost revenue, far more than the $17m the Government had sought to raise through its ill-fated plan to tax employee car parking.

Well first of all I doubt that figure. They’re saying that $2 billion of sales are being made online from overseas retailers, which sounds way too high too me. But the compliance costs would be huge. Customs would have to intercept every single letter coming into NZ, open it, hold it, calculate GST, send an invoice for say $5 and then get it paid and then dispatch it on. A bureaucratic nightmare.

Labour revenue spokesman David Cunliffe said a low threshold for charging GST on overseas purchases would stop the Government “subsidising foreign commerce” and was a “no-brainer”.

Oh wonderful. Make sure everyone knows this. Labour Party policy is to tax your online purchases more. Buy a book from Amazon, and Labour will hold it up at the border until you pay the Government an extra 15% of the price.

Will Labour also block itunes? We can’t have people downloading music and not paying GST on it. So to implement their policy they’ll have to block itunes in NZ, and only allow people to purchase from a NZ located online retailer.

Labour grandstanded on the carpark tax (yet never had a clear policy on it), but have now trumped that with their e-tax. I look forward to detailed Labour policy on what they would reduce the threshold to so we know how many of our online purchases they plan to stop at the border.

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This entry was posted on Thursday, March 21st, 2013 at 9:00 am and is filed under Internet, NZ Politics.
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DPF – but ideologically you’re in favour of broad-base-low-rate, and less tax on income and more tax on consumption, right? (I seem to remember that from the time of the GST increase.)

If you say there are 2 million NZers old enough to have a credit card and use it for on line shopping (a totally made-up figure, I have no idea) then $2b spent is about $1,000 per capita. Probably not the wrong ballpark?

I don’t think I’ve spent even a dollar overseas in the last 12 months, but I know a young guy who is turning his Honda Integra into a race car, and just about all of his income seems to go into go-fast parts from Japan or the USA. He’s more than picking up my share of the on-line spending!

(I wouldn’t mind taking his car for a squirt around Manfield, but on balance I don’t think I’d want to be the owner! )

This is concerning. I purchase the large majority of my research material from places like the Book Depository and sometimes Amazon. I simply cannot get the material here. No one stocks it – many can order it, but it takes twice as long to get, at 2x + the price.

Our retailers have to be competitive, and able to supply at same or similar rates – I accept they can’t, we’re too small etc to cater to everyone’s needs. This is something they will just have to ‘suck up’ – I can’t see any party with a policy like this gaining favorable points on it.

“DPF – but ideologically you’re in favour of broad-base-low-rate, and less tax on income and more tax on consumption, right? (I seem to remember that from the time of the GST increase.)”

DPF says he is in favour of a broad based tax system but his definition of broad does not include imports under $400, or a tax on capital gain (which is an increase in net wealth so should be taxed in a ‘broad’ sense) etc… Or online downloads….

The author of the research commissioned report said it could be in the interests of online giants such as Amazon to voluntarily collect GST for the N Z Government if in return they benefited from faster clearance of their products from clearance agencies.
No holding up at the border. No need to intercept every item purchased. No bureaucratic nightmare. Only minor increased administration costs.
The institute study estimated that abolishing the tax-free threshhold would result in a 27% rise in purchases from domestic internet retailers.
So local companies selling online would make more money and pay more tax and the Government would get more GST.
Sounds like it could be a goer.

I agree with DPF regarding the practicality of it but I am sure we are msising out on a heap of revenue and it does seem a bit unfair that retailers pay this tax but are forced to compete with overseas who do not. Just not sure there is an easy answer to fixing this really.

The lobbying on this is simply to protect margins for local retailers. It’s a competitive market – those retailers not only have to compete with the ‘shop down the road’, but also internet-based retailers including those off shore. If they believe that their sales are being eroded by competition, they need to change to be more competitive.

What they are seeking is, in effect, govt intervention to create nice, comfortable oligopolies for them.

The current competitive environment is a good outcome for consumers. And it is actually a good thing for those businesses that do look to innovate and adapt to remain competitive. (In fact a bit like farmers had when their subsidies were removed in the ’80s.)

Cunningham – people don’t buy offshore for a 15-20% saving. That would be stupid, since the risk involved is much higher (no warranty, international shipping, time taken, etc. – except when the local company doesn’t dispatch for a couple of weeks and the timeframe is the same).
The reason why people shop overseas is because Kiwis and Aussies seem to pay more than twice as much as Americans for some products, even when the postage costs are taken into account. Even if GST was charged at the border or at point of sale, it wouldn’t make any difference, since retailers in New Zealand aren’t even trying to be competitive.

Dime would prefer not to pay GST on online purchases. What about ebay and the like? what a pain in the ass. Dime says NO NEW TAXES!

but to add some balance, cause Dime likes to be “fair and balanced”…

Online sales are doing some serious damage to independant retailers. I know, people on here say things like “well they just have to be more competitive” etc unfortunately its not that simple.

our property market is fucked, the commercial market is also fucked. rents at malls etc are insane. hence when you go into a mall its all chain stores etc or fashion. even small town rents are stupidly high.

then there are the costs out of china. we buy small qty’s. we pay more. if you have a brand, youre paying a premium. US based brand sells to kiwi companies and makes a 25 margin. so the kiwis starting point is that much higher than the yanks.. who also sell to amazon etc

its hard to compete.

there is a solution though. Dime wont tell you how he competes but we are doing good.

quick question – what do the aussies do? they are always protective of industry.

Some companies insist on the purchaser setting up a direct debit account; BP and Z do for aviation fuel. Others, like Christchurch International Airport give you the option, DD or pay a substantial collection fee.

Since GST was meant to partially offset income tax, it is absurd it is not payable. There is a principle here. Retailers are right, for the wrong reasons. Competition in the price of goods is another matter altogether.

Capital gains or wealth tax. There is a principle here too. We need Heinrich Arnold Nordmeyer.

Businessman 1- I’ve got a great idea. Let’s make retailing the growth industry of the century.

Businessman 2- I’m with you. How do we do it.

Businessman 1- We build these big flash centralised shopping centres and call them malls and include plenty of car parks and air conditioning and food and drinks and supermarkets and people will come in thousands.

Businessman 2- But won’t these shopping centres and the cost of financing them and constructing them and running them add to the cost of the items sold?

Businessman 1- Of course it will but these malls will be so popular all other retailing will die out and we’ll be able to charge what we like.

Businessman 2- Sounds like a great idea. Lets do it. But wait, what if someone thinks up a way to sell stuff without people coming to these malls.

Retailing is a dying industry and it can go to the wall like all other industries that don’t adapt

Good grief. Gorillabaiter got it right.

Online choice far exceeds what can be purchased at retail here. Local stockists can’t ever hope to be competitive. When they try to compete for online business, they simply don’t get the job done anywhere near as well as overseas (eg Amazon) in terms of info available. They are simply not competitive so why should they be subsidised? If they think that it’s GST that makes them uncompetitive then they are completely missing the point. Many don’t seem to realise that in some things, it is a waste of time trying to compete with an inferior offering in a global market that is only a keyboard away.

Retail is dying IF what they retail is a commodity that can be easily sourced elsewhere. I get nearly all my running and cycling gear o/seas, and generally pay around 2/5’s to 1/2 of what I would pay here. Bought new aero wheels for the tri bike in December, paid $USD 1200 – here they would be $4K. Shipped them to a friend in the US who was coming out here.

Large brand and big box retail is hurting, and they refuse to change their model, prefering gubbermint to protect them. Boo hoo. Change or die. Dont have a problem with them making a noise, but FFS, concentrate on great product and even better service. The bricks and morter stores I shop at locally are the ones with awesome service.

It’s been a trend for a while that bricks and mortar are being replaced with clicks and order. There’s nothing stopping NZ businesses from selling their products directly online to overseas buyers. In fact my boss is about to launch into that specifically targeting the Chinese market. As Kiwis, we have been slow to exploit the opportunities the Internet offers. I am shocked at the number of NZ businesses whether they sell locally or export that don’t have a website and have no idea how to utilise social media to build a relationship with their customers.

I can’t recommend high enough the book “The Thank You Economy” by Gary Vaynerchuk on understanding how businesses need to change.

So Albertson’s thinking is this: Make imported good more expensive by applying a tax, thereby boosting NZ retailer’s sales. That approach might work for essentials like food and energy, but I suspect most offshore online purchases are more discretionary. Any increase in price would likely lessen demand, resulting in margin pressure, resulting in the killing off some of the very NZ retailers who are upset with the lack of GST.

I recently made a purchase of some running shoes from the UK. They were here in about a week. I would have purchased them here but:

1. I have searched all the major centers and they are not available.

2. Past experience has shown that “if” they order something in it will take months.

3. A simpler shoe of the same brand costs 3 x as much in NZ.

Our retailers offer poor selection, extremelly high pricing and lousy service. They stock out of date products, poor colour and size selection and seem indifferent to suggestions of improving their line up. Then charge like wounded bulls.

If the difference in price between buying local and buying overseas was 15% I think many people would choose the lesser risk and greater benefit for the country, buying local. But the difference is often far greater.

It can be difficult competing with high volume sellers from overseas, but individual freight costs can level the competiveness.

Whatever, it is how it is, the GST threshold doesn’t look like being changed, so businesses have to deal with things how they are and adapt, as some are doing.

Labour never met a tax they didn’t love and this seems on the surface like an easy couple hundred million up for grabs. Like the Capital Gains Tax that would never collect even a fraction of its intended revenue and be riddled with exemptions and spawn easy avoidance, so it is with this King Canute attempt at turning the tides back. Good luck persuading Amazon to collect GST for the NZ government. Heck they cancelled the contracts of approved retailers selling via their website based in Illinois because the IL State legislature levied an online sales tax for IL residents AND for any online fulfillment within the state and online sales/fulfillment from a state the size of IL would dwarf total US sourced online sales to NZ by a magnitude of hundreds to one. The Customs Minister made it clear recently on Radio Pinko that the total cost of NZ Customs infrastructure, storage, warehousing and staffing needed to house and levy GST on international online purchases would far exceed the revenue generated.

I am often a pack mule for family and friends’ online purchases on my frequent trips to NZ. There are only certain items that are cost effective for NZ consumers to purchase online overseas – many US websites won’t accept foreign credit cards, others refuse to ship internationally and still others charge exorbitant fees over and above actual shipping costs when they do. NZ Post’s service circumvents some of these problems. The most glaring pricing differences are for books and the NZ retail booksellers are going to have to adapt or die. Eclectic boutique type book stores that cater for niches that prefer atmosphere, browsing and added value content (authors signings, lectures, wine and cheese evenings etc) will survive as will the giants like Whitcoulls who can sell online as well. There will always be a market for NZ published books and not everyone will want to buy them on line. But for trade publications, textbooks, specialty books and glossy colour hardbacks the markup on NZ retail is so huge as to virtually beg the customer to buy on line overseas. To ask the government to tax online offshore purchases to protect local retail is akin to the old English law requiring owners of cars in the 1890’s to have a man with a red flag walking in front of the car to warn people that a motorcar was coming – a law favoured by railway companies sensing the threat to their monopoly or any other attempts by the manufacturers of an older technology threatened by new technology.

Naysayers thought that supermarkets ending the corner grocer shops was the end of the world as we know it or likewise the impact of Walmart or the Warehouse on small clothing retailers. All these older modes of selling were nothing more than a tax on the poor as the impact of their more costly price was more heavily borne by the poor. Similarly constructing taxes and tariffs to protect industries and save jobs (such as was the case for decades with the high new car tariffs designed to protect NZ’s inefficient car assembly industry) are nothing more than a tax on consumers for the benefit of the chosen protected group. Book retailers are asking government to tax all book buyers to protect their dying industry. The removal of tariffs and subsidies forced our farmers to become the world’s most efficient and those clothing and shoe manufacturers that adapted to the new tariff free environment to carve out niches at the quality end of the market have become another kiwi success story. A vibrant dynamic economy undistorted by protectionists taxes will generate new jobs for the people displaced by the demise of old technologies and sellers who can’t and won’t adapt.

Australia recently “raised” their threshold to $900 AU because of the cost of implementing the collection was not worth it.
What retailers need to do in NZ is clean up their act.
If I can go online and pay overseas ‘retail’ prices for goods and save myself 50% of the value of the goods than if I purchased in NZ, then it is obvious who is taking the piss.
Added to that, it is not normally the retailer who is marking up the goods to much. The importers/distributors in this country are known to put obscene markups before on selling to retailers.
I previously imported electronics into NZ and sold them at my shop, and I could sell a product with 30% margin on it (often more) for less than what I could buy it off the local distributor. Considering their freight bill would be a fraction of mine thanks to volumes, I have no sympathy for them.

Why do you think Australia is currently undertaking an investigation into the price of things like video games etc and why they cost 2-3x more. Look at just about anything in the world, and then in NZ and you will find that the prices are based on exchange rates for 10-15 years ago ie when the NZ dollar purchased $0.5 US or 0.3 pounds

If it is still cheaper to buy some goods overseas even with GST added then what is the problem?
If you purchase a book or a pair of running shoes you should be paying GST. If you are purchasing from say, Amazon, then Amazon should charge you extra for the GST content and pay the tax monthly to the NZ Government. Simple as.

To appreciate why shopping malls have taken over the world, you only need to try getting to “traditional” shops like the ones on the Dominion Rd / Balmoral Rd corner. You end up walking a kilometre through the pissing rain from where you managed to park your car, alongside a dirty noisy arterial road where pedestrians are an afterthought and a mere hindrance to the efficient movement of cars. You’ll probably wait 5 minutes to cross the road. It’s just shit. You’d have to really want something that only those shops have before you’d go to the effort.

Shopping malls have taken over the world because they have almost adequate car parking facilities, and once you’re inside they re-create the ancient pedestrian-friendly marketplace town centres that most civilisations used to have, before massive roads for mass transport messed them all up.

(Except better, because there’s a roof to keep the rain off, and air conditioning, and no horse shit and no dead horses.)

Unfortunately, the massive structure that holds up that wonderful roof needs to be paid for, somehow…

I was under the impression the National Party were in government, not Labour, and therefore it is the National Party that currently sets tax policy? Why don’t we talk about their successes (aided and abetted by the political prostitute) on tax policy for a change?

– Raising GST, an outright breaking of their election promises

– Hugely increasing taxpayer uncertainty and harming inwards investment by letting the IRD run rampant over ordinary commercial transactions with the use of the anti-avoidance provisions (aided by lemming judges unexperienced in taxation)

– Trashing the LAQC regime and replacing it with diabolically drafted LTC provisions

– The failure to entertain a capital gains tax, meaning one of the most fundamental, common, and plentiful forms of income (in the economic sense, before Kiwiblogs resident broke, overgeared property investors start screaming at me) continues to be untaxed, which will lead to an enormous revenue gap with NZ’s ageing population

I have real sympathy for the retailers as they simply can’t compete on price against the private importer who is not only saving on tax at source (e.g. UK VAT) but is exempt within the accepted allowances from paying both GST AND customs duty (for those goods it applies to).

So the clothing retailer is paying 26.5% (10% duty + GST on total cost) more for the same item than importing joe public. Of course their net price per unit will be lower due to bulk purchase but this is offset by the retailers need for a margin (they do have to live).

The ‘lack of choice’ reason for overseas on-line shopping is a different argument to the price one and is simply conseqeunce of our size in the age of internet. I’ll buy gear offshore I can’t get here but won’t internet shop just to save a buck.

“Will Labour also block itunes? We can’t have people downloading music and not paying GST on it.”

DPF, of course GST is already payable on NZ itunes purchases? Why would you think it wouldn’t be?

[DPF: No they’re not. I have my latest receipt and there is no GST component or GST number]

Labour revenue spokesman David Cunliffe said a low threshold for charging GST on overseas purchases would stop the Government “subsidising foreign commerce” and was a “no-brainer”.

This appears to be incorrect. Cunliffe on Twitter:

‏@DavidCunliffeMP

TP-S writes up a question as a statement and DPF goes ape… Calm down folks there is more work to be done on that question.

TP-S is Tom Pullar-Strecker, the journo who wrote the article.

That certainly doesn’t sound like a Labour party position any more than “presented the research to ministers, including Finance Minister Bill English and Revenue Minister Peter Dunne, and had been promised they would seek advice from officials” is a Government position on changing the threshold.

All purchases are made via a bank trnasaction of some kind. e,g, dc or credit card.
So where’s the prooblem with requiring those institutions from adding GST to each and every external transaction.

Transaction Tax.
We will have to do it sooner or later as other means of tax get trashed so might as well do it now. No GST charged then line up at the post office.

Of course this would also catch the electronic downloads via a transaction tax.

No one has pointed oput that retailers not only compete with no GST but they also are charged other costs like ACC and Rates and all sorts of other taxes that don’t get collected from an offshore retailer. There is no unemployment or social welfare attachment to an off shore transaction and yet those very same purchasers wil moan and grizzle should they not get the benefits of those social benefits.

There is no free lunch and its fair to treat the same product by the same rules.

As NZ is a very expensive place to live and wages are pretty low, surely the government should in fact be raising the GST-free threshold, encouraging NZers to shop overseas and therefore bring a bit of competition to the market?

Just goes to show how much we should support grey importers like The Warehouse.

Peter George
Customs Minister Maurice Williamson was interviewed by Radio NZ I’d assume in late 2012 for this January “Insight” piece http://www.radionz.co.nz/national/programmes/insight/20130127 He explains the detailed work his officials did on this issue that I mentioned in my post at 1127am yesterday. What new technique could a Labour led government’s Minister of Customs elicit that wasn’t already considered by the Ministry on this matter? What “more work” could Cunliffe (or any other Labour Minister) do that could render the equation any more economic or will Labour simply demagogue the issue for political purposes and perhaps even introduce the measure for the purposes of ‘fairness’ despite it being revenue negative as a reversion to old fashioned protectionism. Some NZ retailers have been exploiting whatever excuse comes to hand (shipping costs, exchange rate, smaller market) to charge excessive markups and the ability to buy offshore via the internet has exposed the rort. Those 3 issues will always mean goods will cost more in NZ but not double or more as is often the case. Why should consumers be forced via a GST imposition to subsidize the greed of some retailers?